By Tiernan Ray

Shares of Facebook (FB) are down $3.66, or almost 6%, at $61.23, after the company last night said it would pay $2 billion in cash and stock to buy startup Oculus VR, which is developing technology for virtual reality headgear.

Oculus’s “Oculus Rift” VR headset is still in a beta stage, and the company noted it has had over 75,000 orders for the development kit to program the thing.

There’s been much discussion today about how Oculus’s gear is intended principally for video game enthusiasts at the moment, but that Facebook believes it can take the technology to many other avenues of interaction.

At least a couple of bulls on the stock expressed some skepticism about another big acquisition right on the heels of the $19 billion WhatsApp deal just a month ago — see the remarks by Topeka and William Blair.

Eric Sheridan, UBS: Reiterates a Buy rating, and a $90 price target. “While the Oculus Rift was initially conceived as a gaming device, both Facebook and Oculus believe there are applications for this technology in other verticals, including communications, media/entertainment & education. While Oculus will continue to operate independently within FB in pursuit of the gaming opportunity, the company plans to leverage FB’s recruiting & marketing capabilities, infrastructure, and developer relationships. Longer term, FB believes VR will succeed mobile as a mainstream computing platform, perhaps becoming “the most social platform ever.” By investing in Oculus, FB hopes to establish a leadership role in shaping this evolution. That said, FB believes it can justify the cost of the acquisition on the gaming opportunity alone.”

Ralph Schackart, William Blair: Reiterates an Outperform rating. “Facebook indicated that it believes virtual/augmented reality technology could become the next major social, gaming, and communications platform. Similar to the consumer transition from a desktop environment to a mobile environment, Facebook believes future consumers may transition from a hand-held mobile environment to a visual-based augmented reality environment. Facebook believes those companies that take part in developing future platforms have a heavy hand in defining the industry and ecosystem that sprouts around the platforms [...] While Facebook has clearly proved it is a forward-thinking company, we are getting slightly concerned at the rapid pace of multibillion acquisitions. We believe management remains confident in its strategic objectives of these acquisitions, but the acquisitions give us some pause, given the order of magnitude and pace.”

Youssef Squali, Cantor Fitzgerald: Reiterates a Buy rating, and a $67 price target. “While we believe this is another potential “long shot” with an eye-popping valuation, we remain impressed with management’s intense focus on trying to position Facebook for the next computing platform. Additionally, it’s always easier to make these kinds of acquisitions when the core business is going strong, which is the case for FB today. P&L results from its other high-visibility deals, Instagram and Whatsapp, have yet to materialize, but it’s worth noting that growth in users and engagement for Instagram has so far exceeded our expectations, and management remains committed to growing Whatsapp to over 1B users.”

Victor Anthony, Topeka Capital Markets: Reiterates a Buy rating, and a $75 price target. “While it has been our position that visual wearables will become more mainstream over the next few years, and we get FB’s logic behind the acquisition, we are taking a wait-and-see approach and are not immediately blessing it. The Instagram acquisition, in our view, has been a success, with 200mm active users, and a revenue monetization opportunity we can see in the billions. So great execution there. However, digesting two major acquisitions at one time is new for Facebook’s management team and presents risks that could distract management’s attention away from the core business, which at this point, per our recent checks, and FB’s implication, is doing great. Furthermore, as we note below, the monetization opportunity outside of hardware sales is not immediately clear. The monetization opportunity for WhatsApp is clearer but the company today is primarily focused on user growth, which FB repeated last night could top 1B. Thus, in addition to the integration risks, the financial payout from both acquisitions are years out. Perfect execution will require absolute faith in management. We are strong believers in the longer-term opportunity in the core platform but will monitor the risks associated with FB seeking to monetize what they see as the next gen computing and messaging platform via WhatsApp.”

Stephen Ju, Credit Suisse: Reiterates a Neutral rating, and a $65 price target. “Given the rapid shift in consumer engagement preference for Facebook from desktop to mobile/smart phone, we view this acquisition as a forward-thinking move to anticipate continued change to other modalities. As we dream the longer-term dream, other expansive use cases could include 1) communication (immersive versions of Skype, synergies with WhatsApp VOIP), 2) entertainment (cinema/events), 3) medicine (remote doctor appointments), 4) education (tutoring/virtual classrooms), as well as 5) commerce. We do not view this move as a direct entry into the videogame space and rather expect Facebook to facilitate availability of the technology (likely as free) to spur content development.”

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.